The High Price of Freedom

Joy! It cascaded down Frank Phillips Boulevard and rushed along the corridors of the Jane Phillips Episcopal Hospital and the Phillips Hotel. It spilled over into Frank Phillips Airport and gushed through every Phillips 66 station in town. In Bartlesville, Okla., last week, there was good reason for jubilation. Phillips Petroleum, the eighth largest U.S. oil producer, had succeeded in stopping New Yorker Carl Icahn's bid to take over the company after earlier beating back a similar attempt by Texan T. Boone Pickens. A three-month siege by corporate raiders had ended, and worries for the future were replaced by good feelings. "Hallelujah!" declared Joe Seward, general manager of Martin's department stores. "This town is three feet off the ground." Chamber of Commerce Director Sam Cartwright was ecstatic: "Now that Phillips is saved, Bartlesville is saved, and the tumbleweeds won't take over after all."

Although the end of the dramatic struggle for Phillips (1984 sales: $15.7 billion) came as a relief to many local residents, others remained nervous. Phillips' 7,800 employees in Bartlesville, mostly white-collar professionals who make up 40% of the town's work force, were assured that their company would remain under local control; yet some jobs will probably be lost. Shareholders saw the price of their Phillips stock rise from less than $40 when the battle began to the mid-50s in December and close last week at 49 3/ 8. The clearest winners were the raiders. Centimillionaires already, they became richer still. Pickens and his partners walked away with an $89 million pretax profit, while Icahn will gain at least $50 million for 30 days of high- pressure maneuvering. Said he: "I'm happy the shareholders benefited. But I'm no Robin Hood. I enjoy making the money."

By any measure, Phillips paid a high price for independence. It emerged intact but badly bruised. Just one humiliating item on the tab: payments of $25 million each to reimburse the two raiders for the expenses they ran up while trying to take over the company. All told, Phillips Chairman William Douce estimated that the back-to-back assaults will cost the company $150 million. The ordeal will leave Phillips smaller and heavily in debt.

The battle for Phillips was so complex and changed so often that even the raiders at times grew confused amid the offers and counteroffers. It all began on Dec. 4, when Pickens, who had been buying Phillips stock since last October at an average price of $43, announced that he had acquired a 5% stake in the company and was going for more. That assault ended just before Christmas, when Phillips agreed to buy back Pickens' stock for $53 a share. Under the agreement, Phillips also consented to a financial restructuring to make the value of all stockowners' holdings equal to what Pickens received.